Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Was a customized marketing package taxable because it included surveys, campaigns, website work, DVDs, CDs, booklets, and a DVD player?
No. Virginia found the athletic facility's true object was a customized strategy to attract and retain members, not the DVDs, CDs, booklets, DVD player, or other property included in the package. The …
Was an automotive company's purchase of substantially all assets from three related store operators exempt as an occasional sale?
Yes. The asset purchase agreement transferred all or substantially all assets of the sellers' automotive-store businesses, including equipment, inventory, records, customer lists, intangible rights, a…
Who owed Virginia local machinery-and-tools tax when idle recycling equipment was sold and returned to use midyear?
The buyer owed machinery-and-tools tax for the year because it owned the previously idle equipment and returned it to service in July; the equipment was taxable as though in use on tax day. The county…
For Virginia machinery-and-tools tax, whose cost is the 'original total capitalized cost' after used equipment is purchased?
The original total capitalized cost is the amount capitalized by the owner that first bought the machinery new, not a later purchaser's lower acquisition cost. A locality must consider a bona fide ind…
How did Virginia's move to January 2, 2013 federal conformity affect 2012 Virginia income tax returns?
Virginia generally conformed 2012 returns to federal law through January 2, 2013, including the American Taxpayer Relief Act and enhanced federal earned-income-tax-credit rules. Taxpayers still had to…
Did a Florida trust become a Virginia resident trust because one of two co-trustees lived in Virginia?
No. The trust was created and governed in Florida, owned no Virginia property, and was administered by two co-trustees acting by majority. Although one co-trustee and beneficiary lived in Virginia, th…
Were Internet-delivered television and movie subscriptions subject to Virginia communications tax?
No. Virginia treated the online television and movie content as electronically delivered digital products rather than communications services. It refunded the tax, penalty, and interest the provider h…
Did Virginia communications tax apply to subscription-priced mobile apps, and were penalties waived for separate billing errors?
The mobile applications were exempt electronically delivered digital products and could also qualify as information services; monthly subscription pricing did not make them taxable. But Virginia uphel…
Did Virginia communications tax apply to subscription-priced mobile apps, and were penalties waived for separate billing errors?
The mobile applications were exempt electronically delivered digital products and could also qualify as information services; monthly subscription pricing did not make them taxable. But Virginia uphel…
Did Virginia communications tax apply to subscription-priced mobile apps, and were penalties waived for separate billing errors?
The mobile applications were exempt electronically delivered digital products and could also qualify as information services; monthly subscription pricing did not make them taxable. But Virginia uphel…
Did Virginia communications tax apply to subscription-priced mobile apps, and were penalties waived for separate billing errors?
The mobile applications were exempt electronically delivered digital products and could also qualify as information services; monthly subscription pricing did not make them taxable. But Virginia uphel…
When could a Virginia seller accept an exempt organization's certificate in good faith, and whose funds had to pay?
A seller could make a tax-free sale after examining and accepting a properly completed exemption certificate with reasonable care, if the purchased property matched the certificate and the exempt orga…
What 2012 estimated-tax penalty relief did Virginia give qualifying farmers, fishermen, and merchant seamen?
Qualifying farmers, fishermen, and merchant seamen received an automatic waiver of the 2012 estimated-tax underpayment penalty if they filed their Virginia return and paid the entire tax due by April …
Which manufacturing, R&D, out-of-state, and sampled purchases had to be removed, upheld, or reexamined in a Virginia audit?
The appeal produced mixed relief. Virginia removed documented out-of-state exhibit and tie purchases, reduced a mixed software-maintenance charge by 50%, and corrected several audit lines, but upheld …
Could a 2005 Virginia assessment be overturned by arguing that IRS information was obtained unlawfully, without evidence of nonresidency?
No. Virginia held that IRC § 6103(d) authorized the Department to obtain IRS information for a resident nonfiler and that state law allowed an estimated assessment. Because the taxpayer offered no obj…
What Land Preservation Income Tax Credit cap did Virginia Tax Bulletin 13-1 originally announce for 2013?
Tax Bulletin 13-1 originally announced a $113,909,000 statewide cap for calendar year 2013. It applied the statutory CPI-U formula and measured a 13.91% increase over the 2006 base period. This guidan…
Could a federal IT contractor pursue sales-tax refunds after missing Virginia's appeal and reconsideration deadlines?
Not through another appeal or reconsideration request: both deadlines had expired. But because the taxpayer paid the assessment on February 16, 2012, Va. Code § 58.1-1823(A)(iv) still allowed amended …
Must Virginia subtract federal savings-bond income again when calculating the income limit for its Age Deduction?
No. Virginia already subtracted tax-exempt income from United States obligations when computing Virginia taxable income. The Age Deduction's separate income test reduced federal adjusted gross income …
Could Virginia retailers refund sales tax when they later paid high-volume customers a monthly rebate?
No. A month-end rebate paid to reward a high-volume customer did not qualify as a returned-goods adjustment. Because the customer returned no tangible personal property, the retailer could not deduct …
Were a resort's separately stated purchasing fees and combined shipping-and-handling charges taxable in Virginia?
Yes. A 10% purchasing fee charged only with the sale of specified tangible personal property was part of the taxable sales price even when separately stated. Separately stated transportation charges c…
Did DMME-certified pit liners and storage tanks remain exempt from Virginia sales and use tax after July 1, 2006?
Yes. Virginia changed its policy effective immediately and retroactive to July 1, 2006: DMME-certified pollution-control equipment for coal, oil, and gas production remained exempt under Va. Code § 58…
How did Virginia's elective single-sales-factor method work for qualifying manufacturing companies?
A qualifying manufacturing company could elect a modified apportionment method that used triple-weighted sales for taxable years beginning July 1, 2011 through June 30, 2013, quadruple-weighted sales …
Were fragranced antibacterial products with skin-softening claims exempt as nonprescription drugs in Virginia?
No. Even if the FDA treated the products as antiseptic hand washes, Virginia strictly construed the exemption and treated products with fragrance plus advertised skin-nourishing and softening effects …
Was a farm winery's separately charged wedding and event rental activity a separate business for county BPOL tax?
Possibly. The separately charged facility rentals could exist independently of the winery even though events promoted wine and required a minimum wine purchase. Virginia remanded the case because the …
Did Virginia properly shift all income from a nonresident owner's LLC to Virginia because its only client was his Virginia S corporation?
Not entirely. Virginia overturned the auditor's related-party adjustment because the out-of-state LLC had economic substance and charged fees comparable to an unrelated provider. But the owner spent s…
Could a holding-company S corporation subtract gain from distributing portfolio-company stock because the companies were not unitary?
No. Virginia agreed that the S corporation and the 7%-owned company were not unitary, but that did not end the analysis. Holding and managing operating-company investments, reorganizations, and stock …
Could a mechanical contractor remove fabrication, labor, and real-property charges from a Virginia sales-tax audit without transaction records?
Not without proof. Process-piping and exhaust-system contracts generally had tangible property as their true object, fabrication labor was taxable, and exempt installation or repair labor became taxab…
Did a retailer's spreadsheets prove that sampled untaxed deductions were gift-certificate sales rather than taxable sales?
No. The retailer's spreadsheets lacked detailed deduction descriptions and did not reconcile to the sample month's reported gross sales or total deductions. A later spreadsheet also showed gift-certif…
Were a Virginia medical practice's out-of-state software license, remote hosting, and training travel charges taxable?
No, on the stated facts. Tangible software and updates were delivered to an out-of-state hosting company, title or possession passed outside Virginia, and no use occurred in Virginia. Remote hosting w…
When were a meal-plan provider's sales to schools, colleges, fraternities, and sororities taxable in Virginia?
Treatment depended on who consumed or resold the meals. Sales to a for-profit school using meals in its overall services were taxable. If the school separately resold meals, the provider could accept …
Could Virginia estimate an auto repair shop's sales from local business-license assessments when the shop filed no sales-tax returns?
Yes, provisionally. The shop filed no sales-tax returns and did not provide reliable sales records, so Virginia accepted the auditor's use of local business-license assessments as the best information…
Did a manufacturer's utilization study require a city to reduce machinery-and-tools values for economic obsolescence?
No. The city's depreciated-cost method complied with Va. Code § 58.1-3507(B), and the taxpayer's utilization-based economic-obsolescence analysis alone was not a bona fide independent appraisal. Virgi…
When did a taxpayer on out-of-state and foreign job assignments successfully abandon Virginia domicile?
Virginia treated him as domiciled here through 2007 but not beginning in 2008. He had abandoned his former state in 2005 by resigning and moving to Virginia, obtaining a Virginia license and mailing a…
Could a Virginia military resident claim the full basic-pay subtraction and also subtract combat pay already excluded from federal income?
No. The extended-active-duty basic-pay subtraction was reduced dollar-for-dollar when basic pay exceeded $15,000 and fully phased out at $30,000. Combat-zone and qualified-hazardous-duty pay could be …
Were a seasonal campground's seven-month campsite leases subject to Virginia retail sales tax as transient accommodations?
No. Each seasonal lease ran for the campground's entire seven-month April-through-October operating period, identified fixed start and end dates, and was never signed for fewer than 90 days. Virginia …
Must a lessor report sales tax when litigation or a guarantor later pays part of a lease debt written off as bad debt?
Yes. When a dealer takes a sales-tax bad-debt credit and later collects all or part of that account through litigation or a third-party guarantor, Va. Code § 58.1-621 requires the recovered amount to …
Could a contractor buy U.S.-embassy construction materials tax-free when they were temporarily stored at a Virginia receiving point?
Potentially, but only under the contractor-specific exemption. The contractor had to show the materials were used solely in the foreign country, were temporarily stored in Virginia pending shipment, a…
Did Virginia retail sales tax apply when a long-term vehicle lessor passed local personal property tax to its lessees?
Virginia Tax did not decide the passed-through charge under retail sales tax. A long-term highway vehicle lease remained subject to Virginia motor-vehicle sales and use tax rather than retail sales ta…
How did Virginia's 2012 International Trade Facility Tax Credit guidelines treat jobs, investment, and applications?
Under these historical guidelines, a qualifying international trade facility with at least a 10% Virginia port cargo increase could elect either $3,500 per qualified full-time employee or 2% of qualif…
How did Virginia's 2012 Barge and Rail Usage Tax Credit guidelines calculate and administer the credit?
Under these historical guidelines, a qualifying international trade facility could claim $25 for each TEU, or each 16 net tons of noncontainerized cargo, moved by barge or rail above the prior-year vo…
What did Virginia's original Insurance Premiums License Tax guidelines require, and are they still operative?
The original guide moved Insurance Premiums License Tax administration from the SCC's Bureau of Insurance to the Tax Department for taxable years beginning in 2013, while the Bureau retained licensing…
Did a Virginia investment LLC with no employees or Virginia property have to withhold tax for its nonresident member?
No. The LLC held intangible investments and royalty interests but had no employees, Virginia real estate, or tangible property. The Department found that it was not carrying on a Virginia trade or bus…
Did a Virginia investment limited partnership with no employees or Virginia property owe withholding for a nonresident owner?
No. The limited partnership held intangible investments and royalty interests but had no employees, Virginia real estate, or tangible property. The Department found that it was not carrying on a Virgi…
Could an acquiring Virginia corporate group switch from separate returns to consolidated or combined filing after a merger?
Consolidated filing was denied. The acquired group's value was below Virginia's 45% merger-of-equals threshold, and an ordinary merger was not an extraordinary circumstance justifying a change. The ac…
Were cable television converter boxes locally taxable as business tangible personal property in Virginia?
No. The Tax Commissioner held that customer converter boxes were used in the cable television business and that Virginia's 1984 statutory change classified them as intangible property rather than loca…
Did fees from foreign consulting contracts qualify for Virginia's foreign-source-income subtraction as incidental technical fees?
Not on the record provided. The sample contract primarily required consulting services and custom deliverables billed from expected fees and expenses, not a license of preexisting intellectual propert…
Was a deed of trust held by a federal land credit association exempt from Virginia state and local recordation tax?
Yes. Although no Virginia statutory exemption applied, 12 U.S.C. § 2098 exempted mortgages held by a federal land credit association from federal, state, municipal, and local taxation. The originator …
What Virginia tax interest rates applied during the first quarter of 2013?
For January 1 through March 31, 2013, Virginia's tax underpayment and overpayment rates remained 5%. The reduced rate for a qualifying disputed assessment after nine months without a Department determ…
Could a 99%-owned partnership receive Virginia film credits at the entity level without putting those credits on its parent's consolidated return?
Yes, if the stated requirements were met. A partnership 99% owned by the production subsidiary could qualify as the designated credit recipient because it would file a Virginia return and be named in …
Did Virginia's processing of an unauthorized 2005 combined return permit the affiliated group to change from separate filing?
No. Processing the 2005 combined return, moving payments, and changing registration records did not constitute Tax Commissioner approval. The affiliates were treated as not having filed their required…
Did an out-of-state drug developer's Virginia personnel and clinical trials exceed P.L. 86-272's income-tax protection?
Virginia could not give a categorical no-nexus answer. Ordinary sales solicitation appeared protected, and merely seeking health-plan coverage could be ancillary. But some medical-science, regulatory,…
Were subscription access to a web portal, third-party billing, and text-messaging packages taxable in Virginia?
The portal subscription was not taxable because it provided Internet-delivered access without tangible personal property. Customer-specific third-party billing was also an exempt service even if paper…
Could good-faith purchasers keep transferred Virginia land-preservation credits after the easement value was reduced?
No. The credit could be based only on the conservation easement's substantiated fair market value. After the donor and Virginia agreed to reduce the value, the Department could assess transferees who …
Could a Virginia S corporation file a unified nonresident return for only the shareholders who elected to join?
No. Virginia treated unified filing as a discretionary administrative convenience subject to Department conditions. One condition required all nonresident owners without other Virginia-source income t…
How did Virginia marina dealers collect and report sales tax on dyed diesel sold for pleasure watercraft?
Under the historical 5% rules, a dealer could include sales tax in the per-unit pump price if it posted notice, or calculate and separately state 5% of the selling price. Either way, it had to remit t…
Could veterinarians use Virginia's agricultural exemption for animal-health products bought for their practices?
Generally no. Veterinarians were professional-service providers and the users or consumers of supplies bought for their practices, not farmers producing agricultural goods for market. Their special ex…
When were medicated and non-medicated suture materials exempt from Virginia sales tax?
Both medicated and non-medicated sutures were medical devices, not exempt drugs. They could be sold tax-free when specifically purchased by or for an identified individual, or to a qualifying nonprofi…
Was a separately charged safe provided only with armored-car service taxable as a rental in Virginia?
No tax applied to the customer charge under the stated facts. Customers could obtain the monitored safes only with the company's secure-transportation service, lost access after depositing valuables, …
Did a Virginia resident owe state income tax and interest on a sport utility vehicle won in a national contest?
Yes. The sport utility vehicle's fair market value was taxable federal prize income and therefore entered the Virginia resident's federal adjusted gross income, with no identified Virginia subtraction…
Was a reseller of related companies' mobile service a telephone company for Virginia BPOL tax?
No. The reseller lacked an SCC certificate and FCC authorization and did not operate wireless sites, towers, switching equipment, or other mobile-service facilities. Its licensed partners supplied the…
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.